In the face today’s big rally, with market indices pushing +5% here, we are cashing in our index shorts and taking our profit. We do not believe that the secular decline is over, but a sharp bear market rally as happened last November-December is a reasonable probability here. We rode that one out with our short positions intact and it cost us a 29% haircut between 20 Nov and 31 Dec.

Worst case, this rally turns out to be a one-day wonder and we sheepishly have to pay for a taxicab to hustle us to the next stop so we can get back on the short train. The preferable scenario would be that the train just sits here for awhile and we get an opportunity to regain our seats at a discount. Either way, we are avoiding the risk of another big setback.